Management by Objectives -Introduction -Brief Explanation -Implementation Examples

4. Management by objectives (MBO), also known
as management by results (MBR), is a process
of defining objectives within an organization so
that management and employees agree to the
objectives and understand what they need to do
in the organization in order to achieve them.
MANAGEMENT BY
OBJECTIVES

5. Main Concept
The core aim of management by objectives is the
alignment of company goals and subordinate
objectives properly, so everyone in the organization
works towards achieving the same organizational goal.
MBO reflects a proactive way of managing that is:
 result oriented
 emphasize accomplishments rather than inputs
 encourages participation at all levels of an organization

7. Essence of MBO:
 Participative goal setting
 choosing course of actions
 decision making
An important part of the MBO is the measurement and
the comparison of the employee’s actual performance
with the standards set.

8. MBO IN ACTION

10.  Routine objectives
 Innovation objectives
 Improvement objectives
The objectives must be focused on result, not
on activity.
Types Of Objectives:

11. Smart Objectives
Every objective must meet these criteria:

12. Domains and levels
Objectives can be set in all domains of activities
production services sales R&D
HR finance
information
systems
Some objectives are collective, for a whole department or the
whole company, others can be individualized

13. ADVANTAGES OF MBO
 Motivation – Involving employees in the whole process of
goal setting increases employee empowerment, job
satisfaction and commitment.
 The employees are clear as to what is expected from them.
 Better communication and Coordination – Frequent
reviews and interactions between superiors and
subordinates helps to maintain harmonious relationships
within the enterprise and also solves many problems.
 The MBO Process sets a benchmark for every employee.

14. DISADVANTAGES OF
MBO
 It over-emphasizes the outcomes over the procedure.
 It sometimes ignores the prevailing culture and
working conditions of the organization.
 It is difficult to appraise and identify potential. MBO
only deals with performance on the present job.
 MBO is a time consuming process.

16. Where to Use MBO
 The MBO process is appropriate for knowledge-
based enterprises when your staff is competent.
 It is appropriate in situations where you wish to
build employees' management and self-leadership
skills and tap their creativity and initiative.
 Management by Objectives (MBO) is also used by
chief executives of multinational corporations
(MNCs) for their country managers abroad.

17. MBO at Hewlett-Packard
 MBO received a boost when it was declared an integral
part of “The HP Way”, the widely acclaimed management
style of Hewlett-Packard, a computer company.
 At every level within Hewlett-Packard, managers had to
develop objectives and integrate them with those of other
managers and of the company as a whole.
 Written plans were produced that showed what people
needed to achieve if they were to reach those objectives.
 The plans were then shared with others in the
corporation and coordinated.

18.  MBO urged that the planning process, traditionally
done by high-level managers, should be delegated to
all members of the organization.
 The plan, when it finally emerged, would then have the
commitment of all of them.
 As the plan is implemented, MBO demands that the
organization monitor a range of performance
measures, designed to help it stay on the right path
towards its objectives.
 The plan must be modified when this monitoring
suggest that it’s no longer leading to desired objective.
MBO at Hewlett-Packard

19. MBO at Hewlett-Packard
 Bill Packard, one of the two founders of
Hewlett-Packard, said of MBO:
“No operating policy has contributed more
to Hewlett-Packard's success…
…Management by objectives refers to a
system in which overall objectives are
clearly stated and agreed upon, and which
gives people the flexibility to work toward
those goals in ways they determine best for
their own areas of responsibility.”

20. Some Other Organizations
Practicing MBO